Tuesday, August 12, 2014

Marriage is a Lifetime - Lesson 8, Part 2

Back in April (wow, how has it been that long?) anyway.... back in April I introduced you to Dave. And his 7 steps to financial peace. I'll wait for you to go read it...okay now that you're back let's move on to how we incorporated it into our lives.

I think the financial part is HUGE in a marriage, it can tear a lot of marriages apart, this is something that needs/should be done with both partners. It shouldn't be on one person to figure everything out, it should be an on going conversation, daily/weekly/monthly, whatever you chose, just start talking!

If this seems overwhelming I'll break it down for you. Since I'm an engineer, I'll talk in outline format...cause I like the way they look.

*sidenote: We rarely use our credit cards, we use our debit card, so we can see everything that we spend in the month that we spend it, credit cards are a month to a month and half behind when it actually, so it's harder to keep track of spending for that month. If we do end up using a credit card for a big purchase, we do count it in the month that we ACTUALLY spent the money, not when the credit card bill came in.

Okay back to my list:

1)Get at least 2 months worth of data of exactly how you
are spending your money each month (it will surprise you, we didn’t think we
were spending that much on food, but turns we were spending a TON on food)

a)Don't leave anything out (count those quick stops to
7-11 for snack food, coffee, postage stamps, etc, we were able to do this right
away since we don't ever use cash and ALWAYS use our debit card

i)If you can't get the exact details but want to start
right away with budgeting, try your best guess using the data you do have, your budget is constantly changing each month, so monthly adjustments will have to be made.

2)Figure out how much money you are bringing in a month

a)If this varies, use the worst case scenario, that way
if you get more, it’s just an added bonus and can go to whatever you want.

3)Take out the necessities to live

a)Mortgage/rent

b)Food

i)When we first started this we went from spending about
$1200 a month (for just the two of us) to spending about $650 a month, huge
difference right? That’s $550 to use for debt people!

(1)We decided that we wanted to try to spend less, so we
took the money out in cash each month, it really helped us to understand how
much money we were spending on food. We would be out and about and think let’s
go out to eat, and then realize we only have $200 left of food money, let’s
just eat those left overs we have at home. It really makes you see how much
money you waste on food, and how we do a lot of things out of convenience.

c)Utilities – Power, Water, Gas

d)Transportation

i)Car payment

ii)Car Insurance

e)Debt
payments

i)Refer back to debt snowball for this (click here for
Dave’s Debt Snowball Tool - looks like you have to pay for it, but you can try it for 7 days, then you can see how you can adapt their system to work for you in excel); figure out exactly how much extra you have to do
this…the quicker you pay this off, the quicker you’ll have the freedom to spend
your money how you want, when you want! I know easier said than done.

4)Decide what you absolutely need to start saving for.
This might vary depending on how much debt you have to pay off. For example, if
you would rather just throw everything into paying this off as quickly as
possible, that is totally fine, you can do this part after you pay off all your
debt. If you just want to save for some of the things, like House Insurance,
Property Tax, Car Repairs, House Repairs…even if it’s a small amount a month,
it adds up and when those things happen, you can rest assured that you don’t
need to panic and you can just take it out of that “fund”

a)Here are a few suggestions, that Dave gives and that we
do as well.

i)Charitable Gifts

ii)Property Tax

iii)House Repairs

iv)House Insurance

v)Car Replacement

vi)Car Repairs/Tags/Maintenance

vii)Clothes

viii)Medical Bills

ix)Life Insurance

x)Furniture/Home Décor

xi)Gifts (including Christmas)

xii)Vacation

xiii)Entertainment

b)Here are a few that we save for that we think are
important to us

i)Sarah Camera Fund (I’m constantly saving for new equipment)

ii)Music for Mr. (I told you he writes music as a hobby
right?)

iii)Gym

iv)Preschool

5)Now that you have the categories you need to save for,
decide how much you want to save per year and divide that by 12, so you have
your monthly save for each category.

6)Find some way to keep track of your budget. Dave has a
tool you can use here, I’ve never used it, but it’s a start! If you find you
don’t like it, you can figure out what you DO like. We use a very extensive
Excel spread sheet, but I hear that there are some great Apps out there to use.
I like to use Excel, easy to see everything at once on a computer, and not a
tiny mobile device. *sorry I can’t suggest one, if anyone has a good one, leave
it in the comments, others might benefit.

a)Make sure that you distribute how much your projected
income is for the month at the begining of the month, that way you have
something to work towards. Meet weekly to check in with each other and make
sure that your spreadsheet is still working for you, if something came up and
you need to move funds around, do at the meeting.

7)It seems hard now, but really, after almost doing this
for 4 years, Mr. and my time commitment went from about 10 hours a month to
maybe 1-2 hours a month, if that. It really does pay off to know exactly where
your money is going and how it can work for you!

Here is an example of a budget that you could do in Excel, the numbers are purely made up. *There is one more thing that you can't see, I made sure that the Budgeted Amount, equals how much the Total Income is.

As you can see, everything is accounted for. The "Blow Money" category is for those things that you don't plan for and don't fit into a category. Some of the numbers might seem random, like the Personal Care, which is a very extra item, but I copied the excel sheet we did for my parents and some of the numbers I didn't change, like the personal care and the gym.

Of course there is work behind any budget you do, you have to enter the actual numbers into this spreadsheet, just like any budgeting type app you would do. Since we use debit card for pretty much EVERYTHING, I just download our statement into Excel, and use that for helping me enter all of my data into this excel sheet.

Always remember:

You are controlling your money to work for you, not the other way around

If you want to buy an extra pair of shoes, that's great, but the money has to come from somewhere, so maybe the personal care number is a little less. We try not to take money from categories that we will need in the future, like the car replacement fund, or the house insurance, etc.

Was this helpful? I know it's a lot of information at once, but hopefully this gets you started. Just go step by step, do one step each evening, and in the course of a week, you'll have it done!